FocusChina aromatics market braces for oversupply on CNOOC restart

08 November 2011 07:00  [Source: ICIS news]

By Doris Shen

SINGAPORE (ICIS)--Spot prices of benzene and xylenes in the domestic Chinese market look set to weaken, as supply will increase once a huge aromatics facility at Huizhou in Guangdong province resumes operations, while demand is still weak, market sources said on Tuesday.

The facility owned and operated by China National Offshore Oil Corp Oil (CNOOC) subsidiary, CNOOC Oil & Petrochemicals, is the country’s second biggest aromatics plant. It is expected to come back on stream in the middle of the month after an outage of about four months.

The facility can produce 350,000 tonnes/year of benzene, 220,000 tonnes/year of toluene and 900,000 tonnes/year of xylenes, a company source said. r

The company is also expected to resume operations at its 850,000 tonne/year paraxylene (PX) plant at the site at around the same time.

With more supply coming into the market amid soft demand, spot prices of aromatics products are likely to come off, market sources said.

Spot benzene prices stood at yuan (CNY) 7,550-7,600/tonne ($1,189/tonne-1,197/tonne) ex-tank east China on 7 November, while isomer-xylenes prices were at CNY10,100-10,200/tonne ex-tank south China, according to Chemease, and ICIS service in China.

Benzene prices were stable to softer as buyers purchase cargoes on a need-to basis, while isomer-xylene values in southern China slipped last week, given expectations of downward pressure on prices in the near term.

CNOOC Shell Petrochemicals Co (CSPC), which procures benzene supply from CNOOC Oil & Petrochemicals, had been actively buying benzene from the Chinese domestic spot market during the shutdown of the Huizhou aromatics plant.

But this spot purchases will cease to support benzene prices once the Huizhou facility restarts, market sources said.

CNOOC has cancelled plan to purchase cargoes from the spot market in response to the restart.

Supply in the domestic market is more than enough, with about 9,000-15,000 tonnes of benzene heading towards east China from the southern and northeastern part of the country, traders said.

China’s benzene imports for November will also augment domestic supply in the east. Demand coming from the downstream styrene monomer (SM) sector, on the other hand, is expected to weaken because of a turnaround at Jiangsu Leasty’s 400,000 tonne/year SM plant on 15 November, market sources said.

Should there be a delay in restarting operations at CNOOC Oil & Petrochemicals’ PX plant in Huizhou, the domestic Chinese market will have an additional supply of 20,000-30,000 tonnes of isomer-xylenes available for spot sales from the company, market sources said.

The PX plant in Huizhou is China’s second biggest PX production facility.

The bulk of isomer-xylene produced by CNOOC Oil & Petrochemicals is usually used for its own PX production, and sells only 3,000 tonnes/month to the spot market in southern China, a company source said.

Meanwhile, PX demand is also softening from its main downstream – the purified terephthalic acid (PTA) sector – and more supply will only dampen prices further, market sources said.

($1 = CNY6.35)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Doris Shen

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